MANILA, Philippines — The Bangko Sentral ng Pilipinas is maintaining caps on credit card transactions in an effort to ease the financial burden on consumers as the economy recovers from the pandemic.
This means that interest rates or finance charges on credit card transactions will be stable at 2% per month, or 24% per year, the BSP said in a statement on Thursday. The monthly premium on installment loans was also maintained at 1%.
The BSP has also kept the maximum processing fee that credit card issuers can charge for cash advances at P200 per transaction.
“The Monetary Board’s decision will continue to help ease the financial burden on consumers through affordable credit card pricing amid the ongoing COVID-19 pandemic,” BSP Governor Benjamin Diokno said.
“It will also allow the BSP to assess the impact of improving macroeconomic fundamentals and easing mobility restrictions on the performance of the credit card industry,” Diokno added.
Limits on credit card transactions remain in effect unless revised by BSP.
Central bank data showed demand for credit cards eased in the second half of 2021, with credit cards issued and in circulation rising just 0.3% to 10.3 million during of the period. The BSP attributed the weaker demand to consumers increasingly turning to alternative digital products.
With interest rates at an all-time high last year, the cap on credit card transactions has squeezed some banks’ net interest margins. According to the BSP, banks and credit card issuers withdrew 18.5 billion pesos from their credit card transactions in 2021, an amount higher than the previous year but still lower than pre-war levels. pandemic.
But the caps have nonetheless brought great relief to borrowers affected by the pandemic, which, in turn, has also helped the credit card industry stay afloat. The soured debts held by the credit card industry represented 6.8% of their total loan portfolio in 2021, down from the 8.9% ratio recorded at the height of the pandemic in 2020.
Meanwhile, credit card receivables rose 4.9% year-on-year in December last year, indicating consumers are swiping their cards more frequently as the easing of virus curbs replenishes lost household income.
The BSP noted that the credit card industry is considering streamlining its revenue streams by reducing operating costs through digital transformation.